Bad credit mortgages are loans offered to individuals with poor credit background. Before, numerous Canadians experience being turned down by lenders because of their unimpressive credit scores. It was very difficult to apply for loans if you have bad credit because lenders were not that trusting and mortgage options were very limited. But today, you can get a mortgage despite your bad credit and even past bankruptcy. More financial companies are offering bad credit mortgages to borrowers. If you have a not-so-excellent credit report, study the following requirements to apply for bad credit mortgages:
1. Down payment - If you have a bad credit history, most lenders may charge you with a minimum down payment worth 15% of your home value. Borrowers who have good credit scores are given low down payments. So if you want to get a loan but have a bad credit, save for a slightly expensive down payment.
2. Sufficient Income - Lenders examine your capability to pay your monthly mortgage payments based on your gross debt service ratio or GDSR. GDSR is the portion of your total monthly income that can be used to pay for your mortgage. Most lenders want to have borrowers who have a GDSR that is less than 35% because they are more capable of paying off their debt.
3. Appraised Value of Your Property - Before your lender grant you with a
bad credit mortgage, he will ask you to give him an appraised value of your house. Even if you have a bad credit, the amount that you intend to borrow must not exceed the true value of your property.
4. Mortgage Co-signer - Some lenders may ask you to have a co-signer if you have a not-so-stellar credit report. This gives them added security because if you default, your co-signer can be responsible for your unpaid debt. Although you have a good income and the capability to pay for a down payment, lenders in Canada usually prefer borrowers with not-so-good credit reports to have a co-signer.
